Help and advice for new cafe!

[Jurcic]

Hi all

I'm so glad I stumbled across this forum through my research on the topic!

To give you a bit of background, I have a degree in business and have worked in Human Resources since qualification (approx. 6 years).

For a while now I've realised it's not for me and not the reason I got into business. I'm creative by nature and really enjoy customer service and building meaningful relationships.

I've wanted to get into my own business for a long time, but never been in a good position to take the risk. My vision was always a cafe type establishment with a health influence (based on my years of fitness and nutrition research and activity), but also offer traditional cafe fare (cakes, etc.). A few weeks ago I received a bit of a push to investigate further, and an opportunity has come up.

The place is an existing cafe, across from a train station, surrounded by local businesses on the city fringe, and underneath as well as next to an apartment block. It's fully furnished with reasonable decor and comes with all that is currently in there - dishwasher, oven, tables, chairs, fridges etc. It's ready for someone to basically take over with minimal lay out. Only cosmetic changes we'd want to make. Previous owner shut up shop over 12 months ago due to not being present and relying on staff to run everything. Reason its been on the market for so long is apparently people get put off by the lack of immediate parking in front or around the corner, despite there being ample parking in a street 200 meters away. As a result, rent has been reduced significantly and is quite cheap.


There are no competitors in the vicinity, unless you count 7-11. Online reviews of the previous cafe were favourable, with criticism of lack of service during busy periods, and poor customer service from staff.

I have no experience in the industry, but this seems to be a relatively low risk way to venture into it. I've done my research and costings and know what the approximate outlay will be. I have an appointment with the accountant tomorrow, and will follow up with a solicitor reviewing the terms. I’ve booked my self into barista training at the Espresso School (based on feedback here).

I've scoured other cafes and understand what works, why, and what wouldn't, and also have my own unique ideas. I know I'm facing some really long days and am prepared to dedicate my time and energy to make this a success.

I've inspected the property and all seems fantastic and has some real potential.

However I'm slightly apprehensive given I have no experience in the industry and am looking for any advice or ideas you may have. Would it be an almost impossible venture for someone in my position with no cafe/hospitality experience to commit and make this a success? Now that this is starting to come closer to potential reality, I really want to ensure as much as possible that I'm making the right decision.

Should I engage a consultant? Can anyone recommend anyone? I'm based in Melbourne.

Sorry for my ramblings ....Eagerly awaiting your feedback guys. Thanks for all your help!

[chokkidog]

Hi Jurcic and welcome to CS. :-D

I'll pm you tomorrow.

[shortblackman]

Can I place an early order for a short black?

[Jurcic]

Can I place an early order for a short black?

My first sale!!

[TC]

Hello Jurcic and welcome,

My advice- always tread lightly in cafes. It would be good to know all of the reasons why the previous venture went belly up. Going in and trying to run the same place will likely have a similar result. They have already lost their old customers, so a makeover and rebranding will be crucial. If it looks the same, people will likely assume that it is.

In reading your description, the lack of parking is a biggie. It will deter mothers and children during the week and families on the weekend. What's your target market and is it substantial enough to support you? Whilst local apartment blocks can be a bonus, they are often not the cash cow that you might have predicted. What proportion of the residents will be home when you're open? Will you open in the evening? Offer take home ready to heat and eat meals? Often the residents will want to get out and away on the weekend- at someone else's cafe. How will you keep them at yours if that's even possible?

Morning traffic of commuters on the way to the station- bonus- unless they can purchase something as good or better on the station. That said, many will purchase at the other end on their way to work. If there is a station offer, many may well choose that as most will purchase for convenience rather than quality.

Due diligence. It's easy to lose big money and quickly in cafes. At best, they are generally very, very marginal businesses unless shrewdly run. You get busier, you need more staff and the profit equation tips into loss. More make losses than profits. Other than the morning rush, you need big average sales.

Good luck.

Chris

[Jonathon]

Due diligence. It's easy to lose big money and quickly in cafes. At best, they are generally very, very marginal businesses unless shrewdly run. You get busier, you need more staff and the profit equation tips into loss. More make losses than profits. Other than the morning rush, you need big average sales.

Sound advice Chris. I'm no expert on cafes specifically, but I do have lots of clients who run small businesses, including cafes and other food businesses, and I can tell you that many of them run at a loss, or practically no profit.

Many people mistakenly think that a business that runs a loss will shut down, but you'd be surprised how often that's not the case.

There could be personal bank guarantees which might complicate things if the business is shut down.

Or the owner simply wants to run their own business, even though they'd literally make more money working the same hours at Macca's.

Or the business might be run by the spouse of someone who for a variety of reasons is more than happy to see their spouse occupied running a business, even if it costs them $10-20k a year to subsidise that business. Admittedly this is more common in clothes and shoe shops, but I know of a food business where it's currently the case.

But, when run well, cafes can make significant profits. Good F&B, efficient processes, happy motivated staff and good location will normally equate to profit. But other than the location, getting these right proves elusive to most cafe owners.

[Jurcic]

Hello Jurcic and welcome,

My advice- always tread lightly in cafes. It would be good to know all of the reasons why the previous venture went belly up. Going in and trying to run the same place will likely have a similar result. They have already lost their old customers, so a makeover and rebranding will be crucial. If it looks the same, people will likely assume that it is.

In reading your description, the lack of parking is a biggie. It will deter mothers and children during the week and families on the weekend. What's your target market and is it substantial enough to support you? Whilst local apartment blocks can be a bonus, they are often not the cash cow that you might have predicted. What proportion of the residents will be home when you're open? Will you open in the evening? Offer take home ready to heat and eat meals? Often the residents will want to get out and away on the weekend- at someone else's cafe. How will you keep them at yours if that's even possible?

Morning traffic of commuters on the way to the station- bonus- unless they can purchase something as good or better on the station. That said, many will purchase at the other end on their way to work. If there is a station offer, many may well choose that as most will purchase for convenience rather than quality.

Due diligence. It's easy to lose big money and quickly in cafes. At best, they are generally very, very marginal businesses unless shrewdly run. You get busier, you need more staff and the profit equation tips into loss. More make losses than profits. Other than the morning rush, you need big average sales.

Good luck.

Chris

Thanks for the reply Chris!

From information provided, the previous venture went belly up because the owner was not present. He expected and relied on staff to run the day to day business. Re branding, marketing and building relationships before opening would be priority 1. I want to engage with residents and the businesses to find out what they are looking for. As it would be the only cafe in the vicinity, I think I'm at an advantage and have an opportunity to build relationships and customer loyalty. I'm looking to win the relationship first and then expect sales to come.

New signage and some cosmetic changes on the cards definitely. It faces a main road with alot of passing traffic, so bold and vibrant signage is a must, as well as a welcoming and comfortable environment and decor.

I feel the lack of parking can be a biggie on the surface - passing traffic have nowhere visible to stop. But ample parking in a side street 200m down the road can present an opportunity. I'll ensure all hard copy and online promotional material emphasises parking location. However I imagine the target market being the abundance of businesses in the area - people who are on the way to/at work and seeking coffee and lunch - potentially engaging with the businesses, leaving loyalty cards and offers to gain an early following. I plan on experimenting and expanding this aggressively - i.e. Residents are likely not home during the day, but they may grab a coffee plus something out the door. As you mentioned with the ready to heat and eat meals for the apartments, I'd look to arrange a dinner order system. I plan on preparing fresh and lean meals for the residents coming home after a day at work and looking for convenience, and also protein and health drinks for those using on site gym facilities.

I don't think it will be feasible to open evenings aside from this service. Weekends offer some potential if I can gain residential following. Also there is a very busy car wash directly across the road that is constantly pumping, especially weekends.

I'd need to strike the right balance between what I can offer and provide to make the business efficient. Including with staffing costs, as you mentioned. Luckily, I'll be able to leverage my wife 2 days a week. This will be a significant learning curve for me, particularly at the start considering my lack of experience.

Thanks for your contribution, advice, and keeping my mind on the detail!

Petar

[Bames]

My advice: go to a few different suburbs further away from your new cafe, research the cafes that are doing well and the ones that are doing poorly, figure out what the difference is and do that. No need to reinvent the wheel.

Usually from what I have seen the differences are:
- Outstanding coffee. Not just good or great, but outstanding. For this you will need a barista experienced in making outstanding coffee. Don't expect to be able to make the quality your customers will expect consistently while under the pump with 20 orders lined up with no experience - even if you've gone to the Espresso School. Sorry, that's just the truth.
- Extremely modern flavors and ingredients in food. The fact that you're going the health route is great because it's in vogue atm. Your menu should include words like quiona, fennel, gruyère, even elderflower.
- Distressed brick and copper pipes. Every cool cafe has them
- Etc
- Etc

Good luck

[Jurcic]

My advice: go to a few different suburbs further away from your new cafe, research the cafes that are doing well and the ones that are doing poorly, figure out what the difference is and do that. No need to reinvent the wheel.

Usually from what I have seen the differences are:
- Outstanding coffee. Not just good or great, but outstanding. For this you will need a barista experienced in making outstanding coffee. Don't expect to be able to make the quality your customers will expect consistently while under the pump with 20 orders lined up with no experience - even if you've gone to the Espresso School. Sorry, that's just the truth.
- Extremely modern flavors and ingredients in food. The fact that you're going the health route is great because it's in vogue atm. Your menu should include words like quiona, fennel, gruyère, even elderflower.
- Distressed brick and copper pipes. Every cool cafe has them
- Etc
- Etc

Good luck

Nailed it with the experienced barista. My aim is to employ a great barista who also knows their way around a kitchen (How common are this particular species...?) who I can also learn from and progressively train me. This will be another key to potential success....I definitely don't expect to know the intricacies of making consistently great coffee just from a 3 hour course.

[chokkidog]

A big +1 to Chris' comments above in post #5

Sometimes the first idea that pops into your head is the right one.......... you know....... that
niggly little intuitive voice that says do or don't?

Sometimes that first idea is a seed that will take root in a more developed strategy.

Be very careful about taking on a venture where you need patrons to purposefully seek you out.
200 mtrs may as well be 200 kms if people are in a hurry or it's raining.

You will need something that can gain a dedicated patronage that will grow on it's reputation rather than loud and large
signage. Ambience, awesome coffee, great food will all help but only if they are supported by top shelf service.

The human element is too often overlooked by people opening a business on a formula.

"I'll spend half a million and fit out the funkiest cafe in town therefore I will succeed" just won't cut it.

Creating a space where people feel valued and happy to part with their cash, and then come back
with their friends and/or family, needs more than just your dollars.

When visualising your ideas, identify the core elements and keep them separate as far as planning
and filling roles go......... for instance; don't go looking for a barista who can cook.

Chances are they can't do either well. Tie the kitchen, coffee bar and front of house together by theme, ambience, cohesiveness
and quality of product/staff.

The biggie in real estate is location, location, location. This is also true when looking for a venue for
a daytime food/beverage outlet.

One very successful business, on the outskirts of Melbourne, which averages 50kgs of coffee a week, is next door to a post office.

Another high cash turnover venue is an operational winery on a highway in the main street of a tourist town which roasts 60 kgs/week of its own coffee.

One is dependent on foot traffic and convenience, which gets additional weekend custom from its exposure on weekdays;
the other a 'designer wow factor' destination for wine tourists.

The first place was a run down, failed cafe lifted up by a shrewd investor, the other a complete build from the ground up by
an owner with great brand vision.

Spend some hours sitting in iconic and/or busy Melbourne venues and try to see what makes them tick.

Go and look at other venues available, and make an informed choice if you are set on your course of cafe ownership.

Good luck.

[chokkidog]

There are some good general comments here......

Case Study: Taking over a cafe & the Pellegrini's brand | Business Victoria

[mr_fox]

A cafe that is vacant for over 12 months is a warning sign to begin with. The last owner obviously could not pay the lease and subsequently was issued with a vacate letter, which would only give the cafe owner time to fight at VCAT for a mediation hearing.
From there, the landlord probably refused to reduce the rent or worse just wanted the cafe owner out and the lease agreement term of probably 3-4 years paid up.
So calculate 3-4 years remaining on the lease by $60000.00 or $70000.00, gives you an indication what the cafe owner was in for.
From there mediation probably fell through and court proceedings began which could take all of 3-10 months, for the landlord to re-coup what hes owed and the cafe owner to fight for his life and save his business.
No business owner would walk out that easy, as a cafe/restaurant costs in excess of $200000.00 to $300000.00 to set up today and no landlord would risk his building without a signed lease guaranteeing payment every month.
With that said, a lease is easy to get into, (cheap or not, set up or not,) but to get out of for whatever reason other than selling is the harsh truth about small business.

[TC]

A big +1 to Chris' comments above in post #5....

.....200 mtrs may as well be 200 kms if people are in a hurry or it's raining.

Thanks Chokki,

Agreed on location, location, location...

If it were my money on this one, I think I'd keep walking right on by...

200m would constitute a deal breaker.

Chris

[GrahamK]

Good luck with the venture, if you have decided to proceed then you have an exciting time coming.
A few people have mentioned considering the lease, you said you have financial experience so hopefully have it covered. Two things that helped bring my venture down were the lease costs and signage issues. The local council caused us major pain about specific signage which was vital in our case. They were notorious for being difficult.

The other major factor was having the right person in the front. I never intended to be front and centre but circumstances ended with me being it, and I should have listened to my instincts.

All the best, keep us informed on progress.

Grahamk

[Jurcic]

Thank you all for the advice. Definitely keeps me thinking. I'll be going past again tomorrow to evaluate the foot traffic situation. The parking isn't a deal breaker for me at this stage because a lot of my target customer base will be coming from businesses in the area - people who have have their cars parked at work during the day and will be coming during the morning and lunch, and also residents of the existing apartments.

The key factors in my decision are the relatively low risk low cost elements:

- cheap rent
- business fit out with included equipment
- no direct competitors in vicinity
- located next to train station, surrounded by businesses, underneath and next to apartment blocks


If I have my thinking correct, even if I don't do as well as anticipated I have an opportunity to sell the business and make money on it from there.

I've seen the accountant and discussed finances, next stop is the solicitor.

Thanks again to everyone for sharing your knowledge and experience on the whole caper. Even if I don't proceed with this place, it gives me things to consider going forward!

Much appreciated